The weak pound means higher prices!

We’ve done a recent piece on the government’s idiotic taxation strategy pushing up the price on wine, now here’s one explaining how the weak pound has affected prices.

Just to clarify, for those of you didn’t know, the government has increased duty on wine under 15% abv by 36 pence (&vat) per bottle in the last 15 months – even more on wines over 15%! Beer and spirits have also been the victim of huge duty hikes too. Has this achieved the government’s desired goals and increased revenue for them? No. Quite simply, due to these price increases, people are drinking less and the government’s revenue from excise duty on alcoholic drinks has actually fallen sharply! Well done Darling, once again. That man really is an own goal specialist – not only has his strategy reduced revenue from excise duty on alcohol, it’s also contributed hugely to the demise of the on trade business in the UK with pubs and restaurants closing down on a daily basis, putting hundreds and thousands of people out of work where they were paying tax and vat, and onto the benefit system where they’re claiming money. In reality it’s costing the UK billions of pounds per year, but Darling just can’t see it.

Unfortunately, Darling’s clown like antics aside, this has had a desperate affect on the licensed trade and we’re seeing businesses closing down on a daily basis as a direct result. The pubs are the hardest hit, then probably restaurants and hotels, but it affects everyone in the trade particularly independent wine merchants who have to compete with the supermarkets who can afford to sell at a loss.

Anyway, onto the weak pound. 15 months ago the Pound traded at 1.40 Euros or just over US$2 . Last month it was down as low as 1.07 Euros or $US 1.39.

So a bottle of wine costing a merchant 5 Euros in 2008 was £3.57 plus £1.36 duty which is £4.93 plus vat (@17.5%) which is £5.79. This wine may retail at £7.99.

The same bottle still at 5 Euros in 2009 was £4.67 plus £1.60 duty which is £6.27 plus vat (@15%) which is £7.21. This wine would then have to retail at £9.99 – an increase of 25%.

However, as there’s a credit crunch worldwide, the producers have also put on their own price increases and shipping & packaging charges have also increased. Throw in the chancellor’s duty increases and you’ll see wine has increased by as much as 40%!

We’re already in June. VAT is set to revert to 17.5% next January, although there’s plenty of speculation that it’ll actually increase by even more – that’s around £5 a dozen on a case of £10 a bottle wine.

But to put all these consecutive price rises into perspective take a look at this illustration: a wine which cost £8 plus vat last year, cost you £9.40 per bottle, or £112.80 per case. Next year it will cost £10 plus vat at 18.5% which is £11.85 – £2.45 per bottle more, that’s an increase of £29.40 per case! And that’s before Darling increases duty yet again in the next April budget by his already declared 2% above the rate of inflation! So be wise and stock up in the next few months.

Did you know that the only place in the UK where vat is not applicable to retail alcohol sales is the bar in the House of Commons? And parliament has a wine cellar funded by the tax payer to rival any in the world? We may be questioning their personal expense claims but there are still plenty of perks to being an MP!